California residents see health insurance rate increases times two

Maryalene LaPonsie |
December 9, 2010

It's bad enough when your health insurance premiums increase each year at renewal time. It is even worse when you get the bad news in the mail twice in one year. Unfortunately, that was the reality for some California residents in 2010.

After receiving notice of rate increases earlier in the year because of rising medical costs, a second round of mailings went out to some notifying them of further increases--this time because of changes to state and federal law.

Federal health reform and health insurance rate increases

In the battle over health insurance, much has been said about how the new government mandates will affect health plan premiums. The Obama Administration and its supporters argue that health reform will create a long-term reduction in health care costs, after necessary changes are implemented. Opponents argue that health-reform changes will increase company costs which in turn will increase premiums.

Among federal health reform changes already going into effect:

Free preventive services

Dependent coverage on group family insurance plans through age 26

Elimination of pre-existing condition exclusions for children (adults will receive the same protection in 2014)

Elimination of lifetime coverage caps

While group insurance plans can absorb some of these costs, policyholders with individual health insurance have seen the lion's share passed on to them. While federal health reform is expected to increase health insurance premiums by 3.4 percent, some Californians have seen rate hikes in excess of 50 percent for the year, according to a San Francisco Chronicle report.

California bans gender ratings

In addition to the 3.4 percent increase in premiums because of health reform, analysts estimate that individual health plan subscribers in California can expect a new state law to add another 17.7 percent to their premiums as the state prepares to ban gender ratings this year. Gender ratings refer to the practice of charging women higher health insurance premiums than men. The practice has been used largely by insurance companies to offset the higher claims incurred by younger women as compared to similarly aged men.

Taken together, it would seem that policyholders in California are in store for a 20 percent increase in their premiums. So why are some consumers reporting overall increases of nearly 60 percent? Some say health insurance companies are simply using the new laws as an excuse to raise rates.

For now, it seems that California residents will have no choice but to bear the increases or search for cheap health insurance elsewhere. Blue Shield of California says 80 percent of its individual policyholders can expect to see health insurance rate increases in January--and that's after a third of them already got bad news in October.